PT Resource Alam Indonesia Tbk ($KKGI) will allocate the capital expenditure (Capex) of USD1.5 million to maintain the heavy equipment in order to boost the coal production in 2017.

Director of PT Resource Alam Indonesia Tbk, Agoes Seogiarto Suparman, said their coal production target was as much as 4.5 million ton in 2017. "To support the target, the company's capex will not be too big because the capex will be used to maintain and support heavy equipment," he said in Jakarta.

According to him, their coal production was mostly contributed from PT Insani Baraperkasa, the coal mining in East Kalimantan with the land concession of 24,477 hectares. In addition, PT Kaltim Mineral has conducted coal exploration and will support the coal production next year. PT Loa Haur will operate in 2017 and hopefully will increase the company's coal production. (LK)

Indonesia's coal stocks are expected to be negatively affected by coal price reversal after China's government stepped up its efforts to cool coal price given the stronger correlation between coal price and stock price recently. Downgrade coal sector to Underweight. Downgrade all coal stocks to Sell.

Downgrade coal sector to Underweight, sell all coal stocks. We downgrade our recommendation on coal sector to Underweight (from Neutral) as we see risk of coal price reversal after China's government stepped up its efforts to ease steep increase in coal price. Newcastle coal price index has declined to US$105/ton from the peak of US114/ton with coal contract for January delivery concluded at US$94.5/ton FOB on globalCOAL (vs FY17/18F of US$70/US$69/ton of our forecast). We downgrade our recommendation to Sell on ADRO (Sell, Rp1,200TP), PTBA(Sell, Rp9,500TP), ITMG(Sell, Rp12,250TP), and HRUM (Sell, Rp1,600TP). ADRO, PTBA, ITMG, and HRUM are trading at FY17F PE of 12x/12x/10x/13x.

China has intensified efforts to cool down coal price by 1) extending the time period for the supply relaxation policy for selective big coal miners to increase production to an equivalent of 330 days' output from 276 days restriction policy, 2) urging more long-term contracts between major coal miners with major power plants, and 3) raising transaction fee for thermal coal futures for same-day trading to curb short-term speculative trading. In addition to that, one of the largest coal producers recently indicated that it will stop selling coal to buyers without annual long-term contracts to further prevent speculative activity in the coal market.

Correlations between coal price and stock price are the highest since 2014. While we expect stronger earnings outlook next year driven by higher coal price, we believe that stock price direction will be determined by the volatility on coal prices due to strong correlations between coal price and stock price recently. We take a look at the 3-month correlations of coal stocks to coal price since 2014. Based on this, the current correlation levels are the highest, standing at 56% for ADRO, 50% for ITMG, 57% for PTBA, and a whopping 66% for HRUM. This makes Indonesia's coal stocks very vulnerable to coal price reversal given the steep increase in the past few months. Note that Indonesia’s coal stock has increased by an average of +284%YTD vs. the index of +11%YTD.

Expect stronger earnings outlook in 2017 for Indonesia coal miners, mainly driven by higher ASP. Our discussion with large coal miners indicates moderate production growth next year to maintain high coal price and avoid oversupply in the market. In terms of coal price, we believe at US$70-75/ton coal price is already a good number for coal miners as it's already >30% higher than the avg. of US$55/ton in 1H16. However, we also expect production cost will increase due to higher stripping ratio and contractors’ fee (lower discount fee). Our sensitivity analysis indicates that every 1% increase in coal price will increase ITMG's and HRUM's earnings by 4.8% and 4.0% respectively vs. ADRO's and PTBA's of 3.3% and 2.8%.

Key risk to our call is if coal price can sustain at >US$100/ton due to weather related issue.

Austin, Tex. — Donald J. Trump made many important campaign promises on his way to victory. But saving coal is one promise he won’t be able to keep.

Many in Appalachia and other coal-mining regions believe that President Obama’s supposed war on coal caused a steep decline in the industry’s fortunes. But coal’s struggles to compete are caused by cheap natural gas, cheap renewables, air-quality regulations that got their start in the George W. Bush administration and weaker-than-expected demand for coal in Asia.

Nationwide, coal employment peaked in the 1920s. The more recent decline in Appalachian coal employment started in the 1980s during the administration of Ronald Reagan because of the role that automation and mechanization played in replacing miners with machines, especially in mountaintop removal mining. Job losses in Appalachia were compounded by deregulation of the railroads. Freight prices for trains dropped as a result, which meant that Western coal — which is much cleaner and cheaper than Eastern coal — could be sold to markets far away, cutting into the market share of Appalachian mines. These market forces recently drove six publicly traded coal producers into bankruptcy in the span of a year.

Mr. Trump cannot reverse these trends.

For Mr. Trump to improve coal’s fate would require enormous market intervention like direct mandates to consume coal or significant tax breaks to coal’s benefit. These are the exact types of interventions that conflict with decades of Republican orthodoxy supporting competitive markets. Another approach, which appears to be gaining popularity, is to open up more federal lands and waters to oil, gas and coal production.

Doing so would only exacerbate coal’s challenges, as it would add to the oversupply of energy, lowering the price of coal, which makes it even harder for coal companies to stay profitable. Those same policy actions would also lead to more gas production, depressing natural gas prices further, which would outcompete coal. Instead of being a virtuous cycle for coal, it looks more like a death spiral. And this is all without environmental regulations related to reducing carbon dioxide emissions, which aren’t even scheduled to kick in for several years.

Even if the president-elect tried to make these moves, surprising opponents might step in his way. Natural gas companies are the primary beneficiaries of, and now defenders of, clean air and low carbon regulations. They include Exxon Mobil, the world’s largest publicly traded international oil and gas company, which operates in a lot of countries that care about reducing carbon emissions. The company issued a public statement in support of the Paris climate agreement on Nov. 4, the day it took effect. Shutting down coal in favor of natural gas, which is cleaner and emits much less carbon, is a big business opportunity for companies like Exxon Mobil.

In the battle between coal companies and major oil and gas producers, I expect the latter will be victorious.

The rapid uptake of cheap renewables is also a contributor to coal’s demise. Mr. Trump made campaign comments suggesting the end of support for renewable energy technologies. But his recent statements call for supporting all energy forms, including renewables, suggesting he won’t target them after all.

Even if he did, what are his options? Their tax subsidies are already scheduled to expire or shrink. Plus, wind and solar farms are usually installed in rural Republican districts, which explains why they get so much Republican support in the first place. All those rural districts in America’s wind corridor might not be thrilled if their preferred candidate seeks to undermine one of their most important sources of economic growth.

The saving grace for coal production in the United States may be exports to Europe or China. But Europe’s demand for coal is waning. And Mr. Trump seems to be marching us toward a trade war with China. Doing so means the Chinese could retaliate by not buying our coal. And even if a trade war is avoided, cheap coal is readily available from nearby Australia.

What does this mean for the average American? More of the same when it comes to energy, which is a good thing. Energy prices will stay low and our air quality will keep improving. And both will help the economy grow.

Any way you slice it, coal’s struggles are real and hard to mitigate. No matter how much Mr. Trump tries to protect coal from market competition, doing so will be hard to execute and will get him crosswise with important Republican stakeholders and long-held Republican policy priorities.

Michael E. Webber is the deputy director of the Energy Institute at the University of Texas, Austin, and author of “Thirst for Power: Energy, Water and Human Survival.”

Fitch Ratings stated in an outlook report that the Asian thermal coal industry will remain under pressure in 2017 due to more-than-adequate capacity and price adjustments that are likely to be downward. The strong pricing rebound since early 2016 is unlikely to be sustained as the Chinese government relaxes its workingday curtailment policies to manage prices. Also, India has been ramping up domestic supply aggressively to enhance energy security and reduce current account deficits, while domestic demand growth has been lackluster. At this stage, Fitch expects Indonesian coal producers that focus on the export market are likely to suffer the most as India, their largest buyer, experiences weak thermal power generation, curbs coal imports and increases utilization of higher-rank Australian and South African coal. (Fitch)

We visited four coal miners recently, and got updates on their outlook for 2017. On production, only Indo Tambang is aiming for flat growth while Harum Energy has the highest target (+33% YoY). Up until now, none of the miners’ customers have locked in their FY17 coal purchase prices. Meanwhile, all players expect their stripping ratios to rise next year. We reiterate our BUY on United Tractors, as we expect earnings to recover (mostly on a rise in mining contracting volume). It would also benefit from a weakening IDR and is the safest play on the recovery in coal prices.

¨ No customer has locked in FY17 purchase prices. The increase in coal prices was faster than what the coal miners’ customers had expected. As a result, no customer has locked in their FY17 coal purchase prices yet. Some have only locked in their 2017 coal purchase volume, as they think coal prices may retreat from the currently high levels.

¨ Higher stripping ratios, but with unchanged mining contracting fees. Based on our talks with the coal miners, all of them expect their stripping ratios to rise next year. However, they still hope to see mining contracting fees remaining unchanged. Up until now, most of the firms were still negotiating mining contracting volumes and fees with their contractors. The miners’ expectations for an unchanged mining contract fee in FY17 are different from United Tractors. It expects less discounts in FY17 due to the recovery in coal prices.

¨ Harum Energy expects to see the biggest production increase. Harum Energy expects its coal production to hit 4m tonnes (vs its FY16 target of 3m tonnes) next year. In 2012, its production peaked at 12m tonnes. In 2011-2016, it cut down on coal production to preserve the long-term value of its assets, as coal prices fell. Meanwhile, Indo Tambangraya Megah (Indo Tambang) expects production growth to stay flat (Figure 1).

¨ Harum Energy is the most exposed counter to the spot coal price. Among the four coal miners, Harum Energy is the most exposed to spot coal price. This is as it sells its coal using spot prices. Therefore, it should start benefiting from the increase in prices from 4Q16 onwards. By contrast, its peers should fully benefit from the current increase in prices from 2017 onwards, as most of their coal selling prices for FY16 have been locked in.

¨ Indo Tambang has the biggest exposure to the China market. China is the main driver behind the increase in imported coal demand. Indo Tambang is the most exposed coal miner to this market (25% of sales are made to Chinese customers), followed by Adaro Energy (14% of sales) (Figure 1). As at 9M16, Harum Energy and Bukit Asam have not sold coal to China. However, they said they would record sales to China from 4Q16 onwards.

¨ All coal miners are the beneficiaries of the weakening IDR. We expect the IDR to continue softening to reach an average of IDR13,700/USD in FY17 (YTD average: IDR13,286/USD). The coal miners’ revenues are mostly dominated in USD terms. Meanwhile, the contribution of USD to their costs is less than to their revenue (Figure 1), which should improve profit margins. Harum Energy and Indo Tambang are likely to benefit the most from a weakening IDR, considering that the difference between USD contributions to their revenue and total costs are the highest.

¨ Reiterate BUY on United Tractors with a IDR24,700 TP. We reiterate our BUY call on United Tractors, as its earnings are set to recover in FY17 from higher heavy equipment sales, and mining contracting and coal sales volumes. We think this has not been factored in by consensus yet. The company should also benefit from the weakening IDR in its mining contracting and coal sales businesses. Also, with consensus lifting its earnings estimate, this should also boost United Tractor’s share price performance. We consider this stock as the safest play on the recovery in coal prices. (Hariyanto Wijaya CFA, CPA)

If you want a snapshot of what the global energy map will look like under President Donald Trump, look no farther than the stock market.
Glencore Plc, the world’s top coal trader, surged more than 7 percent on Wednesday. Vestas Wind Systems A/S, the world’s biggest wind-turbine maker, plunged as much as 13 percent. The swing foretells a story of the most carbon-intensive fossil fuel making a comeback, while the fight against climate change -- and investment in wind and solar power -- languishes.

"De-carbonization, which has been the organizing principle of Obama’s energy policy, came to a screeching halt last night," said Bob McNally, president of consultant Rapidan Group in Washington and a former senior energy official at the White House under Republican President George W. Bush.

In his only major energy policy speech before the elections, Trump said that he would rescind “job-destroying” environmental regulations within 100 days of taking office and cancel the climate deal reached last year in Paris.

“A Trump administration will focus on real environmental challenges, not the phony ones we’ve been looking at,” Trump told supporters in May in North Dakota, the birth-place of the U.S. shale revolution.

If the president-elect delivers on his campaign promises, he could effectively roll back eight years of U.S. energy policy, with consequences to industry giants like Exxon Mobil Corp. and oil-rich nations including Saudi Arabia and Venezuela.

“Trump has promised a dramatic shift in U.S. energy policy, from getting out of the Paris climate deal, to easing regulation on domestic oil and gas drilling, to scrapping the Clean Power Plan that affects the role of coal," said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former White House official under President Obama.

Few Clues

To be sure, Trump has offered few clues on how he plans to implement his plans. Energy and climate policy has taken a back-seat to immigration, the economy and debate about the candidate’s fitness for office. And some of his proposals are contradictory, like his pledge to boost both natural gas and coal, two fuels that compete against each other in the power generation market.

Yet few doubt who’s likely to win and lose, particularly as Trump can rely on supportive lawmakers in Congress to push his agenda.

"The result is undoubtedly a blow for the renewable energy industry," said Matt Loffman, an analyst at energy consultant Douglas-Westwood in Houston. "The historic election result is perhaps welcome news for a hydrocarbon industry that has been on the ropes for over two years."

Coal prices already are enjoying a renaissance after China, the world’s largest consumer, cut domestic production, forcing power plants to buy overseas. The cost of thermal coal in the Australian port of Newcastle, a benchmark for Asia, has more than doubled since January to a four-year high of $114.75 a ton.

Shares of big coal miners such as Anglo American Plc, BHP Billiton Plc and Rio Tinto Plc rose between 2 percent and 4 percent on Wednesday. Peabody Energy Corp., one of the largest U.S. coal companies, surged as much as 67 percent. Meantime, wind turbine makers Gamesa Corp.

Tecnologica SA and Nordex SE fell. Solar panel makers plunged in New York, led by SunPower Corp., First Solar Inc. and Canadian Solar Inc.
As coal enjoys a comeback, the biggest loser could be the fight against climate change. Under President Barack Obama, the U.S. rescued a two-decade old process the United Nations promoted to rein in pollution, forging a climate change deal last December. Along with China and more than 190 other countries, the so-called Paris agreement set out a framework for all nations to cut emissions.

It would be difficult, but not impossible for Trump to pull out of the Paris accord. While the Senate never voted on the Paris deal, it’s part of the 1992 UN Framework Convention on Climate Change, which the U.S. ratified under Republican President George H.W. Bush. Trump would have to renounce the 1992 treaty and risk bringing down the entire UN process to scrap Paris. The U.S. would have to give three year’s notice to withdraw from Paris.

But Trump doesn’t need to cancel Paris to derail the process, effectively hampering the growth of renewable energy, analysts and campaigners said.

Yukari Takamura, a professor at Nagoya University in Japan who has followed climate change talks for more than a decade, said the Obama administration took a lead that contributed "enormously" to the Paris deal. "Lack of such leadership might slow down the progress" by unsettling the investors who need to fund renewable developments, she said.

As Trump shapes his energy agenda, the first clue about his priorities could come with his selection for secretary of energy. Obama surrounded himself with policy experts and academics such as Steven Chu and Ernest Moniz. Trump has relied so far on the advice of Harold Hamm, the founder and chief executive officer of Continental Resources Inc., one’s of America’s largest shale oil producers.

Whoever his choice as energy secretary, the global fossil fuels industry, which over the last four years has been on the defensive with Obama, is likely to find a friend in the White House.

"The oil and gas industry is a clear winner with the new president," said Alexandre Andlauer, head of oil at research firm Alphavalue in Paris. “U.S. oil companies have a better future today than yesterday.”

Resource Alam noted its revenue in 3Q2016 as much as US$72.44 million or 7.6% lower than the same period last year by US$78.40 million. For local sales, it was mostly contributed by sales of high pressure laminate and melamine laminated particle boards by US$262 thousand and coal export noted US$72.13 million.

The company managed to reach higher profit by pressing its selling expenses. Resource Alam cut down more than half of expenses for loading from US$2.68 million to US$1.06 million in 3Q2016. Cost for freight also reduced significantly from US$4.70 billion to US$836 thousand as of September 2016.

Resource Alam through its subsidiary PT Bias Petrasia Persada signed Offshore contract with Global Hydro Energy GmbH dated February 25, 2016 for the purchase major equipment components of two sets spiral Kaplan turbine and generator with CIF term to the port of Tanjung Priok Jakarta Indonesia. The purchase will be used for hydroelectric power plant located at Cicatih West Java, worth EURO 2,410,000. (LM)

- +9% gains in MSCI Indonesia since our country upgrade in July - Since our upgrade of Indonesian equities to overweight two months ago in the MIG publication after clarity on its tax amnesty programme emerged, sentiment has further improved following the appointment of well respected Finance Minister Sri Mulyani Indrawati. The Indonesian equity market has seen strong equity inflows in 3Q16 lifting the index up ~9% (local currency terms, +8.2% in USD), which has outpaced world equities’ gains (+5.2%) for the same period and supported our call.

- Year to date’s gains of +18.6% has also more than recouped 2015’s losses of -12%, which has supported the turnaround highlighted in our January 2016’s South East Asia Equity Strategy report. The equity market rally year to date has been supported by a benign environment of lower interest rates, stable IDR currency vs the USD, under-owned positions in global portfolios and improving confidence in Indonesia’s recovery story. Estimated equity inflows into Indonesia so far for 3Q has exceeded the total inflows for 1H16, driving the market to new highs. Since mid May this year, it is estimated that net equity inflows reached $1.7bln, vs $1.6bln net outflows over the whole of 2015 (source: JPM estimates).

- Near term positives post amnesty and cabinet reshuffle look priced in, valuations are now close to 10 year high – At 16x PER, Indonesian equities is now trading close to +2 standard deviations to its 10 year historical average multiple and at its highest valuation level since 2007, which we believe has priced in much of the near term positives. Although near term liquidity is likely to remain supportive given benign expectations on interest rates, we caution that valuations have caught up and believe it is prudent to start taking some money off the table. On domestic updates, while the recently released 2017 budget is credible, it is unlikely to lead to further corporate earnings upgrades given a moderate government spending target of 6% (planned fiscal deficit for 2017 is 2.4% of GDP, flat/lower than 2016E). Towards the end of September and December which marks the first and second phases of the tax amnesty programme’s staggered tax rates for declared wealth, investor sentiment may also be influenced by expectations over the tax collections.

- Muted start to the 9-month tax amnesty programme, although still early days - As of 23rd August 2016, the asset declaration in the Tax Amnesty Program has reached Rp51.7tn, consisting of 85% onshore/15% offshore assets (12% overseas assets declared, 3% overseas net assets repatriated), while asset repatriation has reached Rp1.6 tn. Momentum of onshore assets declared in first half of August has picked up, with the tax office reporting about Rp11.5tn worth of onshore assets declared (>4x July’s). About three-quarters of the assets declared were from private individuals, and the balance private entities, which we view as supportive of property sector’s recovery given interest rates are expected to remain low while the Ministry of Finance has allowed repatriated funds to be invested in real assets (such as property and gold).

- Looking ahead, earnings upgrades need to pick up momentum for the rally to have more legs - Earnings wise, the recent 2Q results season was mixed with single digit corporate top line growth from a year ago. Concerns on banks remain dragged by asset quality issues while commodity related earnings have been moderate. Following the latest 2Q earnings season (where consensus earnings were trimmed -2% lower for FY16E and FY17E), FY16E and FY17E earnings are now forecast to grow +7% and +14% respectively (higher than Asia ex Japan equities’ 2.2% FY16E and 11% for FY17E respectively) which we believe is priced in current valuations.

Time to lock in some profits – Switch out of names which have rallied and offer no upside to target prices- Sectors we are cautious on are: Commodity related plays which have rallied and priced in recovery expectations (coal – Bukit Asam, ITMG, palm oil – Astra Agro, London Sumatra), Banks (loans growth will be moderate while we expect asset quality concerns to remain a near term overhang) and Utilities (in particular, Perusahaan Gas – where we think profitability will remain pressured by regulatory efforts to lower gas prices).

Preferred Picks/Switch Ideas

- Preferred Sectors we would accumulate new positions are: Property (Bumi Serpong – Western Jakarta play, large landbank catering to middle income buyers), Telecommunications (Telekomunikasi Indonesia – improving smartphone penetration and data usage supported by a young population), Consumer (Indofood and Media Nusantara, which benefit from an improving domestic economy in 2H16) and Infrastructure (Jasa Marga – No. 1 toll road operator, long term beneficiary of infrastructure development in Indonesia).

- Risks to the current rally include weaker than expected global economy, faster than expected Federal Reserve interest rate hikes which may result in global liquidity volatility and disappointments in the domestic recovery and infrastructure spending pace (continues to be a focus in the 2017 budget, with 9% yoy expected growth).

China imported 9.31 million mt of thermal coal in July, rising 30.7% year on year and up 23.5% from June to the highest level since December 2014, according to data released by the General Administration of Customs Wednesday.

JAKARTA - PT Resource Alam Indonesia Tbk ($KKGI) was able to increase efficiency and push down operational costs during the first half 2016 according to the company’s financial statement submitted to Indonesia Stock Exchange.

Due to lower coal export, Alam’s net sales declined 10.5% to US$48.5 million while cost of goods sold deflated 8.2% to US$37.7 million. Gross profit by the end of June 2016 amounted US$10.7 million down 17.4% compared to June 2015.

The real saviour to the company financial results was the significant reduction to the total operating expenses which amounted US$5.13 million or 34% lower compared to the previous year over the same period. As so, income from operations amounted to US$5.59 million or 7% higher year-on-year.

By the end of the first semester 2016, Resource Alam noted net profits touching US$4.6 million which is 39% more than what was booked in the first semester 2015. (CH)

MANILA, July 21 (Reuters) – The Philippines’ coal consumption could grow by more than 1 million tonnes annually until 2020 as it expects to switch on more coal-fired power plants to support its economy, the head of a local industry group said on Thursday.

The Southeast Asian country’s consumption of the fossil fuel reached 22 million tonnes last year, and about 80 percent of that, or a record high 17.4 million tonnes, had to be imported almost entirely from Indonesia, the world’s top seller of thermal coal used in electricity generation.

Higher Philippine coal demand could be good news for Indonesia though it might be insufficient to move prices in an over-supplied market.

The Philippines relies heavily on coal imports as domestic supply, mainly from mine operated by Semirara Mining Corp , is not enough and the heat content is too low to be used in most of the country’s power plants. Imports in 2014 totalled 15.2 million tonnes, based on government data.

“We’re looking at an increment of 1 million tonnes per year until 2020,” Arnulfo Robles, executive director of the Philippine Chamber of Coal Mines, told reporters on the sidelines of a power industry forum.

“That’s a very conservative estimate,” he said. Robles welcomed Energy Secretary Alfonso Cusi’s policy statement earlier this month retaining coal as a core part of the country’s electricity generation mix while at the same time pushing aggressively for clean energy.

Robles downplayed the impact of an Indonesian ban on coal shipments to the Philippines, saying only small vessels have so far been stopped from delivering coal. Supply to the country’s power producers is delivered through large ships, he said.

Last month Indonesia said a halt on coal shipments to the Philippines would remain in place because of security concerns, after seven Indonesian sailors were kidnapped in the southern Philippines.

While its rivals innovated and iterated, coal stayed stagnant. Now it’s almost too late.

Coal is getting killed in the U.S. That’s largely because its main customer, the electricity industry, is switching to fuels or sources that are either cheaper or cleaner (or both), like natural gas and renewables. In March, for example, coal accounted for only 24 percent of electricity generated down in the U.S.—that’s down from 33 percent in March 2015 and from 41 percent in March 2014. So far this year, U.S. coal production is just two-thirds of what is was last year.

Coal is being massacred by a combination of market forces—natural gas is really cheap and abundant, renewables are getting cheaper, and meanwhile state and federal regulations and mandates are pushing power producers to use fuels or power sources that create fewer emissions. In such an environment, coal has a hard time competing. (Natural gas produces about half the amount of carbon dioxide per British thermal unit created as coal does.)

The reasons these anti-coal forces have gained real strength in the last several years are largely technological developments and the logic of industrial scale. But coal producers’ response has generally not been to innovate but to respond defensively. They fight regulations and help fund lawsuits aimed at stopping policies that discourage coal use. They back politicians—mostly Republicans but some Democrats—who try to reduce subsidies and support for renewables and attempt to shape laws and regulations in ways that are more favorable to coal. But it hasn’t been working: Republican presidential candidates who run hard on coal keep losing and will likely lose again. In many of the biggest states—California, the entire Eastern seaboard—greens have far more lobbying clout than coal miners.

It’s easy to look back and conclude that it was obvious that the eventual rise of cheap natural gas and utility-scale renewals would spell doom for coal. But it didn’t have to turn out this way. The challengers to coal gained market share and social legitimacy because of unpredictable strides in technology, innovation, and investment. Fracking, continually improved upon and applied at immense scale, made cleaner-burning natural gas extraordinarily cheap, and hence attractive to utilities. Renewables were a laughably small segment of the country’s energy sources several years ago. But a decade of investments in small wind and solar farms, and then in bigger wind and solar farms, and then in huge ones, has likewise made those sources more appealing.

What if coal producers had taken a cue from their rivals and invested systematically in technologies and innovations to make their product greener? Could they have figured out a way to make their dirty rocks emerge as a low-carbon (or even a no-carbon) fuel source? Would coal still be in its precarious position?

Now, it’s not as if the coal industry has simply stood idle while other power sources ate its lunch. There are several large-scale efforts underway around the world aimed at allowing coal to burn more cleanly. The idea is generally to capture or reuse the carbon dioxide and other emissions released when coal is burned. The technology exists. But it currently costs a lot of money to do it, in part because carbon capture is still in the experimental stage. Still, it’s happening: A plant in Saskatchewan, Canada, the Boundary Dam Carbon Capture Project captures up to 90 percent of the carbon dioxide emitted in burning coal—which is then injected into nearby oil fields to improve production. There’s the Kemper plant in Mississippi, which is being supported in part by federal funds, that is designed to capture up to 65 percent of emissions and send the carbon dioxide to oil fields. But it is running massively over budget. A similar project is in the works in Texas.

Carbon-free or carbon-reducing technologies, including clean coal technologies, are always really expensive and kludgy at first, especially compared with the established way of doing business. The first modern electric car had to be an expensive luxury vehicle. The first solar panel systems and wind farms built in this country were uneconomic—both the panels and turbines were exorbitantly expensive, as was the design and construction of the systems. Why? Engineers and project managers had to design processes on the fly. The supply chains serving them lacked the scale and volume of production to bring costs down.

In many industries, the 1.0 iteration is generally expensive and not particularly functional. But then you apply the lessons learned to make the 2.0 version more compelling and cheaper. In the meantime, the underlying technology improves. As the market grows, more competitors enter, which spurs price reduction and further breakthroughs. Higher volumes of orders lead to more scale, which turns expensive specialty products and devices into cheaper commodities. Iterate through that process a few times, and you get a functional industry. That’s precisely what has happened with solar panels, wind turbines, and fracking in the last several years.

This process—moreso than any government war on coal—has made life difficult for coal producers. As rivals have made quantum leaps in efficiency and cost, coal has effectively stood still. Solar and wind and fracking had to leap. Coal didn’t have to, so while the market price of coal may be cheaper now than it was a few years ago, it doesn’t burn much cleaner. In contrast, in some parts of the country today the cheapest electricity a utility can buy is produced by solar.

Now, here’s a thought experiment. Between 2009 and 2015, the U.S. coal industry produced more than 7 billion tons of coal. What if the coal-producing industry in 2009 decided to tax itself—say, $2 for every ton mined—and then plowed that money into demonstration projects, carbon capture research, infrastructure, and subsidies for next-generation coal plants? What if it had invested $14 billion in efforts that would allow coal to be burned with no emissions, or with dramatically fewer emissions?

Doing so would not have guaranteed success, or some miraculous breakthroughs. But I’m reasonably sure that we’d be on the third and fourth generation of carbon capture projects, instead of the first; that the costs of building new carbon-capture projects would be far lower than they are today; that researchers would have developed useful new procedures and equipment; that we’d have an industry that knows how to construct such projects on budget instead of incurring massive overruns.

Of course, this would have required the sort of collective action and foresight of which few industries are capable. But had the coal industry done so, it would have had the possibility of positioning itself as part of the solution to lower emissions, rather than as the bulk of the problem.

You could argue that it’s not the miners’ responsibility to ensure that the use of their resource doesn’t produce negative externalities. They’re not the ones who buy and burn the coal, after all. But that’s not why they should’ve done it. As we’ve seen, the industry’s sole customers—electric utilities—now have choices in how they meet demand for electricity. They can convert plants to run on natural gas, or build large-scale renewables, or focus on efficiency and storage instead of production. They could pull plenty of levers if they want to cut emissions.

The coal industry, which had the most to gain from investments in clean-coal technology, has run out of levers to pull.

JAKARTA - Coal export of PT Resource Alam Indonesia Tbk (KKGI) decreased 16% to US$24.9 million in the first quarter 2016 compared to US$29.7 million in 2015 over the same period.

Referencing the company's first quarter statement submitted to Indonesia Stock Exchange (IDX), Resource Alam Indonesia did not record sales to major client Maxrise Trading Limited in the 1Q16, who had contributed 21% of the company's total sales the previous year over the same period.

At the same time, the company was able to secure client KCH Energy CO Ltd, which had contributed 16% of the company's sales in 1Q16. Resource Alam Indonesia was also able to boost sales to its largest client Nature Ore Trading Ltd, who had contributed 65% of the sales by 1Q16

The company's total revenue by the first quarter 2016 had reached US$25 million or 16% lower compared to US$29.8 million last year over the same period. The revenue was also supported by small sales of high pressure laminate and melamine laminated particle boards.

With in the first three months of this year, the company posted a gross profit of US$5.73 million, down 15% year-on-year (yoy). Operational income amounted US$2.93 or down 6% yoy. And income for the year attributable to owners of the parent entity amounted US$2.5 million or 75% higher yoy. (CH)

Coal analyst, Janeman Latul upgrades Bukit Asam earnings on the back of better ASP from higher value coal and improvement in cost management. He also emphasizes on railway debottlenecking which should propel the contract fulfillment with PLN. All the positives aside, Janeman still has his concerns on global coal prices. Thus, following the 50% rally YTD, he cuts his rating to O-PF from BUY but increase our target price 32% to Rp7,500/share from Rp5,700/share

- Following the 1Q16 good result, Janeman increases his assumption on ASP considering higher coal while at the same time factoring in China macro data and the demand environment to be generally constructive through 1H16 before tailing in the second half as policy support adjusts.

- To manage the cost better, Bukit Asam shifts from renting heavy equipment & vehicles (among the biggest COGS items) to buy the equipment. PTBA bought Satria Bahana Support (SBS) to do its coal mining services last year and reducing Pama’s role over time.

- Janeman believes in Bukit Asam’s debottlenecking from railway capacity improvement. He forecasts a modest 11% 3-years Cagr on the railway haulage, which will help boost its sales tonnage to 25.5mn tons in 18CL, a 10% Cagr.

Coal issuer Resource Alam Indonesia ($KKGI) establishes a new subsidiary in the power plant segment with base capital of IDR500 million to meet its electricity needs, and participate in the 35,000 MW power project.